Friday, January 07, 2011

Any academic paper that can link globalisation and a riveting read is good by me. Having read the first book last year sometime I admit to not putting the book in the context of globalisation and cannot recall how the book links to the gains from international trade even though I teach this stuff. I now feel that I must reread the book with this new found knowledge.

Early in the 18th century, before the birth of political economy as a discipline, two of the earliest novels in the English language were published: Robinson Crusoe (1719) by writer and economic entrepreneur Daniel Defoe, and Gulliver’s Travels (1726) by the cleric and political adviser Jonathan Swift. The first was widely perceived as an entertaining adventure story, the latter as a pioneering work of science fiction. Both contain indirect comment on the foreign policy of Britain at the time. When viewed from the perspective of the modern economist, however, the works appear to be expressions of opposing positions on the desirability of a nation pursuing integration within a world economy. Crusoe demonstrated the gains from international trade and colonization and even the attendant social and political benefits. He explores the instinct to trade overseas, stages of growth, and the need for careful cost-benefit calculations. By contrast Swift warned of the complex entanglements that would arise from globalization, especially with foreign leaders who operated from theory and models rather than common sense. He makes a case for economic autarky.

Tuesday, January 04, 2011

Having published a VSL paper and wanting to do more (the work is somewhat down the queue at the moment along with more proactive blogging) I always had a nagging doubt about the whole process of calculating VSLs and why they should differ across countries and levels of development.

The VSL is closely related to the environment especially when it comes to environmental regulation - it regs save lives then they can be justified - but how many lives and at what cost?

After the mega-catastophies post (see below) what better way to begin the year than seeing how VSL is influenced by the cause of death. My pre-reading intuition would be that it will matter but I am not convinced that it should.

Abstract: The Value of a Statistical Life is a key input into the calculation of the benefits of environmental policies that save lives. To date, the VSL used in environmental policy analyses has not been adjusted for age or the cause of death. Air pollution regulations, however, are linked to reductions in the risk of dying for cancer, heart disease, and respiratory illnesses, raising the question whether a single VSL should be applied for all of these causes of death. We conducted a conjoint choice experiment survey in Milan, Italy, to investigate this question. We find that the VSL increases with dread, exposure, the respondents’ assessments of the baseline risks, and experience with the specific risks being studied. The VSL is higher when the risk reduction is delivered by a public program, and increases with the effectiveness rating assigned by the respondent to public programs that address specific causes of death. The effectiveness of private risk-reducing behaviors is also positively associated with the VSL, but the effect is only half as large as that of public program effectiveness. The coefficients on dummies for the cause of death per se – namely, whether it’s cancer, a road traffic accident or a respiratory illness – are strongly statistically significant. All else the same, the fact that the cause of the death is “cancer” results in a VSL that is almost one million euro above the amount predicted by dread, exposure, beliefs, etc. The VSL in the road safety context is about one million euro less than what is predicted by dread, exposure, beliefs, etc. These effects are large, but the majority of the variation in the VSL is accounted for by the public program feature, the effectiveness of public programs at reducing the indicated risk, and dread. The effects of exposure and experience are smaller. These results raise the question whether using VSL figures based on private risk reduction, which is usually recommended to avoid double-counting, severely understates how much a society might be willing to pay for public safety.

Abstract
There is a low but uncertain probability that climate change could trigger “mega-catastrophes,” severe and at least partly irreversible adverse effects across broad regions. This paper first discusses the state of current knowledge and the defining characteristics of potential climate change mega-catastrophes. While some of these characteristics present difficulties for using standard rational choice methods to
evaluate response options, there is still a need to balance the benefits and costs of different possible responses with appropriate attention to the uncertainties. To that end, we present a qualitative analysis of three options for mitigating the risk of climate mega-catastrophes—drastic abatement of greenhouse gas emissions, development and implementation of geoengineering, and large-scale ex ante adaptation— against the criteria of efficacy, cost, robustness, and flexibility. We discuss the composition of a sound portfolio of initial investments in reducing the risk of climate change mega-catastrophes.

About me

This blog is written by Professor Rob Elliott, an academic economist, with an interest in all things international and environmental..I am currently a Professor of International and Environmental Economics at the University of Birmingham..Find me at my homepage.

This weeks read

Following the recent workshop on the "Economics of the Stern Review" and the fuss caused by the "great global warming swindle" this book represents an excellent introduction to the topic. Chapter 6 is the chapter it all hinges upon.